First off, as I'm unaware of later MB chassis designs so I can't speak for them, I'd just like to say that the 124 design with default setting of outside air was bad engineering.
Not only that, but to have the system not "remember" your preference for recirculated air when you start up the car and having to hit the dash button every time you're behind a smoking car is a pain in the #%#$ too.
To top it off, the "recirculated" setting doesn't seem to truly keep out outside air, at least not in my 300E. It could be a problem with my particular car, but I can still smell traces of unwanted outside air with the little red button lit up.
Anyone else have this same problem, or feel as I do?